Like lots of spin-offs, Versant went public six months ago and immediately went into forced selling, with the share price almost halving over the following couple of months. Some institutions couldn’t own smaller media names. Others didn’t want exposure to declining linear telly assets. So the stock, with quite a fanfare on X, came public and immediately traded lower. That setup naturally attracts value investors.
At its lows, Versant was probably good value. Versant traded at a $4bn market cap and just a few turns of EBITDA, printing over $1bn of FCF. Net leverage sat in the low-to-mid ballpark of most media peers. Management talked extensively about dividends and buybacks. At that price, Versant had the ingredients of the classic Greenblatt setup, leaning into a stock that the market had kicked to the curb for a quick puff.
But now that the puff is gone and stock is almost back to square at a $6bn market cap, in this writeup, I’m gonna argue why you should probably stay away. The more time I’ve spent reading through filings, the less Versant feels like a misunderstood spin and the more it feels like the straightforward melting ice cube many perceive it as. Businesses in secular decline almost always look cheapest right before investors fully appreciate how quickly earnings power can deteriorate. And in this case, the melting may accelerate over the next several years.